peters & co. annual energy conference · 2018. 1. 18. · september 30, 2017. ... 2018 capital...

Obsidian EnergyPeters & Co. Annual Energy ConferenceJanuary 2018

ObsidianEnergy.com | TSX/NYSE: OBE

Important Notices to the ReadersThis presentation should be read in conjunction with the Company's audited consolidated financial statements, management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 2017. All dollar amounts contained in this presentation are expressed in millions of Canadian dollars unless otherwise indicated.

Certain financial measures included in this presentation do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore are considered non-generally accepted accounting practice ("non-GAAP") measures; accordingly, they may not be comparable to similar measures provided by other issuers. This presentation also contains oil and gas disclosures, various industry terms, and forward-looking statements, including various assumptions on which such forward-looking statements are based and related risk factors. Please see the Company's disclosures located in the Appendix at the end of this presentation for further details regarding these matters.

2


Obsidian Energy Corporate Profile

3

Production boe/d 31,000-32,000

Growth % 5%

Total ExpendituresCapital ExpendituresDecommissioning

$MM$MM

$125$10

ExpensesOperating ExpenseG&A Expense

$/boe$/boe

$13.50-$14.00$2.00-$2.50

Share PriceDec. 31st, 2017

$/share $1.56

OBE-TSX Daily Volume% of shares outstanding

MM 0.90.2%

OBE -NYSE Daily Volume% of shares outstanding

MM 1.00.2%

Market Capitalization $MM $787

Net Debt(1) $MM $410

Enterprise Value $MM $1,197

Corporate Metrics

FY 2018 Guidance

AlbertaViking

1,766 boe/d (1)

Net Sections: 170

Cardium18,876 boe/d (1)

Net Sections: 450

Index Map

Peace River

4,823 boe/d (1)

Net Sections: 235

Deep BasinNew Wells on Q4 2017

Net Sections: 700

Legacy Asset Production of 4,701 boe/d (1)

See end notes

(1) Numbers are quoted from Q3 2017 release

Production Guidance

30,500 - 31,500

30,000

30,500

31,000

31,500

32,000

4

Operations Update Demonstrates Continued Operational Delivery

FY 2017 Production of 31,700 boe/d

Beat Guidance

FY 2017 Productionboe/d

• The plan we outlined at the beginning of the year has played out nicely• Portfolio showed its ability to deliver

De-risked and helped shape 2018 program through the drill bitEntering 2018 with operational momentum

11-03-43-8W5 CARDIUM4 well Hz pad

On Production Jan 3, 2018

WILLESDEN GREEN11-03-43-8W5 Pad

Average 700 boe/d per well

PEACE RIVERConfirmed Upside

in Heart of Acreage

2018 Program Commencing in Following Weeks

3 miles

5 kms

T43

R8W5

500 boe/d per wellFor three wells from our second

half program

ObsidianEnergy.com | TSX/NYSE: OBE 5

Waterflood Performance is Impressive• Cardium Decline Rate lowered from

approximately 20% to 5%

• Waterflood and base optimization projects initiated in 2016

Cardium Base Production Declineboe/d

Pembina Waterflood Activity

Converted and reactivated 37 wells in PCU #9 since Q3 2016

Drilled 8 new injectors to support 2017 new drills

Actively managing more than 120 existing injectors

5 miles

10 kms

T48

R10 R9W5

T47

10,000

12,500

15,000

17,500

20,000

Jan-16 Jul-16 Jan-17 Jul-17Base with No Waterflood SupportBase with Waterflood SupportActual Base Production with Waterflood and Optimization Support

OBE Operated Cardium unit

OBE Cardium land

Waterflood activity since Q3 2016

Actively managed inj.

2017 OBE well

Drilled 8 new injectors in 2017

Actual Decline 5%Decline 20%

Optimized Waterflood

Decline 10%

Decline 20%

See end notes


Focused 2018 Plan• Predictable & Liquids Weighted Growth Profile• Development Capital is 64% of Total Expenditures• Flexibility to expand capital program in H2 and extend growth rate

2018 Production (boe/d)2018 Production 31,000 – 32,000 boe per day

Capital Spend ($MM)2018 $135MM Capital Expenditures

20,000

22,000

24,000

26,000

28,000

30,000

32,000

34,000

2017E A&D Adjusted FY 2018E

5% A&D Adjusted Production Growth

See end notes


Vast Portfolio Optionality on DisplayEmploying a quicker payout program that balances primary drilling with targeted low capital integrated waterflood opportunities

2018 Development Allocations ($MM) 2018 Operated Spuds22 Operated spuds planned in 2018

80% Av. IRR45% Av. IRR

40% Av. IRR100% Av. IRR

50% Av. IRR

Cardium 8

Deep Basin3

PROP5

AB Viking6

22

0

5

10

15

20

25

2018 Wells Spud

See end notes


Short Cycle Focused Cardium Program

2018 Cardium Development Allocations ($MM)

Willesden Green 2018 Development2 Well Primary Pad

5 miles

10 kms

R10

T47

5 miles

10 kms

T48

• Taking advantage of existing injectors in Pembina for low cost integrated waterflood

• Primary drilling in Willesden Green accessing clean sand and bioturbated intervals

• PCU#9 & Willesden Green development accelerated into Dec. 2017 for cost savings of approximately $0.5MM

R9

10 miles

15 kms

R7W5

T43

OBE operated Cardium unit

OBE Cardium land

Water injector

Hz injector conversion

OBE Recent Activity

2018 OBE well

2 Operated primary wells for 2018 – Drilled

Dec. 2017

T453 miles

5 kms

T43

R8W5

11-03-43-8W5 CARDIUM4 well Hz pad

Currently on production

WILLESDEN GREEN11-03-43-8W5 Pad

Non-Operated partner well

OBE (40% WI)High initial rates from 11-03 pad

• 11-03 pad averaged approximately 2,800 boe/d since the wells came on production

• Average of 700 boe/d per well since wells came on production

2018 development of 2 well primary pad approx. 20km east


Strong Well ResultsThree wells from our second half program exhibiting

rates over 500 bbl/d per wellDecember average 618 bbl/d on one of those wells

HarmonValley

HarmonValleySouth Seal

100/15-34-83-18W5On Production: 10/9/2017

December: 121 bopdDrill Cost: $74/m

INDEX MAP

10 miles

15 kms

R20W5

T80

R15

OBE landAcquired land in 2017PROP

104/16-36-82-18W5On Production: 10/14/2017

IP30: 262 bopd or December: 269 bopd

Drill Cost: $79/m

102/15-26-82-18W5On Production: 9/20/2017

December : 489 bopdDrill Cost: $107/m

102/08-25-82-18W5On Production: 8/12/2017Last 30 Days: 216 bopd

Drill Cost: $120/m

9

PROP Program Returned to the Heart of Harmon Valley South• Economics still attractive

post carry

• Well costs dropped 17% in H2 versus H1 due to optimized well length and cheaper cost per meter

• Confirms optimism for 2018 plans in heart of Harmon Valley South

100/15-34-82-18W5On Production: 8/31/2017

IP30: 288 bopdDrill Cost: $65/m

103/14-34-83-18W5On Production: 9/20/2017


102/14-34-83-18W5On Production: 9/21/2017

IP30: 77 bopd or December: 127 bopd

Drill Cost: $62/m

100/02-27-82-18W5On Production: 8/31/2017


See end notes

100/04-36-82-18W5On Production: 10/3/2017

IP30: 159bopd or December: 618 bopd

Drill Cost: $120/m102/01-08-83-17W5

On Production: 12/11/2017First Oil: 12/18/2017


100/10-36-82-18W5On Production: 10/29/2017

IP30: 366bopd or December: 438 bopd

Drill Cost: $84/m

102/01-31-82-17W5On Production: 12/09/2018

First Oil: 12/18/2017IP24: 90 bopd

Drill Cost: $76/m


100/04-18-32-1W4On Production: 10/11/2017

IP30: 188 boe/dPercent Liquids: 76%

100/14-06-33-2W4On Production: 9/15/2017


100/03-18-32-1W4On Production: 10/13/2017


Compeer GP

Esther GP

Misty GP

Monitor West GP

102/02-18-32-1W4On Production: 9/5/2017


INDEX MAP

10 miles

15 kms

OBE gas plant

OBE land

R5 R1W4R10

T35

T30

102/03-18-32-1W4On Production: 10/3/2017


T25102/04-18-32-1W4

On Production: 10/7/2017IP30: 179 boe/d

Percent Liquids: 66%

100/02-18-32-1W4On Production: 8/28/2017


10

AB Viking Program Continues to Exceed Expectations

102/01-30-32-2W4On Production: 8/30/2017


103/02-23-32-2W4On Production: 9/27/2017


Continuing to evolve development strategy to enhance economics and maximize capital efficiency

102/02-23-32-2W4On Production: 9/26/2017



INDEX MAP

5 miles

10 kms

OBE landOBE operated Cardium unit

R8W5

T44

T41

WILLESDENGREEN

100/02-07-043-07W5 MNVLOn Production: 10/12/2017

Initial Rate: 3.4 MMCFD, 38 bbl/mmcf free condensate

24 bbl/mmcf other liquidsCurrently choked for liquids



31 bbl/mmcf other liquids

Deep Basin Results are Liquids Rich

Obsidian Energy 80% Working Interest

• Foray into Deep Basin executed on schedule and on budget

• Tested different upper Mannville targets with variable pressure and reservoir quality



30 bbl/mmcf other liquidsCurrently choked for liquids

See end notes


Total 2018 Corporate Capital Efficiencies$/boe/d

2018 Capital Efficiency Buildup• Program leverages the short cycle opportunity set in our portfolio• Development Capital efficiencies of <$15,000/boe/d• Total Capital efficiencies of <$25,000/boe/d

$7,000 $8,000

$14,000

$16,000

$20,000

<$15,000

<$25,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

DeepBasin

Optimization PROP AB Viking Cardium Total 2018Development

Total 2018Capital

Cap

ital

Eff

icie

ncie

s ($

/boe

/d)

$86MM Development Capital

See end notes


Appendix


End Notes

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All slides should be read in conjunction with “Definitions and Industry Terms”, “Non-GAAP Measure Advisory” and “Forward-Looking Advisory”

Slide 3. Obsidian Corporate Profile

Daily Volume (shares) is the 30 day average share volume traded on Canadian and US Exchanges per Bloomberg. Production, % Liquids, Operating Costs, and Netback and Net Debt are based on Q3 2017 results. Operating costs are net of carry from the Peace River Oil Partnership and netbacks include hedging. The net sections for Deep Basin are approximate numbers and are internal estimates

Slide 4. Operations Update Demonstrates Continued Operational Delivery

Willesden Green average rates are quoted from on-stream as of January 3, 2018 and averaged until January 15, 2018.

Slide 5. Waterflood Performance is Impressive

Cardium base production and decline is based on actual data. Lines have been smoothed for illustrative effect to adjust for volatility inherent in day to day oil and gas operations. Capital efficiencies on optimization projects are internal estimates and rounded. The number of actively managing existing injectors is an internal estimate

Slide 6. Focused 2018 Plan

Production, capital expenditures are based on internal estimates for 2018

Slide 7. Vast Portfolio Optionality on Display

Internal Rates of Returns are rounded and based on a blended Sep 30, 2017 strip price and 3rd party reserve evaluator deck

Slide 8. Short Cycle Focused Cardium Program

Initial rates are the average of daily rates since on production, as at January 13th, 2018. Cost savings of $0.5MM are an internal estimate

Slide 9. Program Returned to the Heart of Harmon Valley South

Peace River Oil Partnership carry is expected to end in 2017

Slide 11. Deep Basin Results are Liquids Rich

Choked is an industry term that refers to device that is used to control fluid flow rate or downstream system pressure

Slide 12. 2018 Capital Efficiency Buildup

Capital efficiencies for each core area are based on capital spent in that area on new production adds, 12 month forward production average, on an capital weighted average basis and rounded. Corporate Capital efficiencies includes all capital spent, 12 month forward production average, on an capital weighted average basis and rounded


Definitions and Industry Terms

15

Hz means horizontal well.

IP means initial production, which is the average production over a specified time period.

IRR means Internal Rate of Return which is the interest rate at which the NPV equals zero.

Liquids % means the percentage of crude oil and NGLs from the total barrels of oil equivalent of production.

Liquids means crude oil and NGLs

Mmcf means million cubic feet.

Mmcf/d means million cubic feet per day

M means meters

MM means millions

Net Debt means Senior Debt plus bank debt plus non-cash working capital deficit, detailed in the Non-GAAP measure advisory.

NGL means natural gas liquids which includes hydrocarbon not marketed as natural gas (methane) or various classes of oil.

PCU #9 Means Pembina Cardium Unit number 9

PROP means Peace River Oil Partnership

TD means total depth where drilling has stopped

Q3 means the third quarter

Q4 means the fourth quarter

Spud mean the process of beginning to drill a well

A&D means oil and natural gas property acquisitions and divestitures.

A&D Adj. means oil and natural gas property acquisitions and divestitures.

Base means production with no additional production from new drilling

bbl means barrel or barrels.

boe and boe/d mean barrels of oil equivalent and barrels of oil equivalent per day, respectively.

Capital Expenditures includes all direct costs related to our operated and non-operated development programs including drilling, completions, tie-in, development of and expansions to existing facilities and major infrastructure, optimization and EOR activities.

Company or OBE means Obsidian Energy Ltd, as applicable.

Enviro means decommissioning expenditures.

E means estimate

FX means foreign exchange rate, in our case typically refers to C$ to US$ exchange rates.

Free Cash Flow, which is Funds Flow from Operations less Total Capital Expenditures

FY means fiscal year

G&A means general and administrative expenses.

H2 mean second half of the year


Non-GAAP Measures Advisory

16

Non-GAAP measures advisory

In this presentation, we refer to certain financial measures that are not determined in accordance with IFRS. These measures as presented do not have any standardized meaning prescribed by IFRS and therefore they may not be comparable with calculations of similar measures for other companies. We believe that, in conjunction with results presented in accordance with IFRS, these measures assist in providing a more complete understanding of certain aspects of our results of operations and financial performance. You are cautioned, however, that these measures should not be construed as an alternative to measures determined in accordance with IFRS as an indication of our performance. These measures include the following:

Netback is a measure of cash operating margin on an absolute or per-unit-of-production basis and is calculated as the absolute or per-unit-of-production amount of revenue less royalties, operating costs and transportation. The measure is used to assess the operational profitability of the company as well as relative profitability of individual assets. For additional information relating to netbacks, including a detailed calculation of our netbacks, see our latest management's discussion and analysis which is available in Canada at www.sedar.com and in the United States at www.sec.gov; and

Net debt is the amount of long-term debt, comprised of long-term notes and bank debt, plus net working capital (surplus)/deficit. Net debt is a measure of leverage and liquidity


Forward-Looking Information Advisory

17

Certain statements contained in this presentation constitute forward-looking statements or information (collectively "forward-looking statements. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "budget", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "objective", "aim", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this presentation contains, without limitation, forward-looking statements pertaining to the following: that we are on track to meet all 2017 guidance metrics including Q4 A&D adjusted production growth, 2017 total production per day, total capital expenditures for the year and operating expenses within the guidance range; our expected base decline rates for production in 2018 and 2019; our expectation for when certain wells will come on production; that we will continue to evolve our development strategy to enhance economics and maximize capital efficiencies; that the economics in Peace River will continue to be attractive post the carry ending; that there is clear downside protection to our capital program through our current hedge book; our expected approach to development including the area-specific asset development plans; the timing and our expectations of such development activities; that there could be flexibility to expand the 2018 capital program in H2 2018, which in turn would drive more growth; our capital spending plans in 2018; our expected percentage production growth rate for 2018; the expected average internal rates of return at the various locations; the expectation that short cycle development drives strong capital efficiencies; the expected 2018 corporate capital efficiencies by location and the Company as a whole; our expectation for the average 2018 production range per day; and our expectations for operating costs and G&A costs for 2018 and the associated target ranges for those costs.

The key metrics for the Company set forth in this presentation may be considered to be future-oriented financial information or a financial outlook for the purposes of applicable Canadian securities laws. Financial outlook and future-oriented financial information contained in this presentation are based on assumptions about future events based on management's assessment of the relevant information currently available. In particular, this presentation contains projected operational and financial information for end of 2017, 2018 and beyond for the Company. The future-oriented financial information and financial outlooks contained in this presentation have been approved by management as of the date of this presentation. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein.

With respect to forward-looking statements contained in this document, we have made assumptions regarding, among other things: our ability to complete asset sales and the terms and timing of any such sales; the economic returns that we anticipate realizing from expenditures made on our assets; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future capital expenditure levels; future crude oil, natural gas liquids and natural gas production levels; drilling results; future exchange rates and interest rates; future taxes and royalties; the continued suspension of our dividend; our ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including weather, infrastructure access and delays in obtaining regulatory approvals and third party consents; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully; our ability to obtain financing on acceptable terms, including our ability to renew or replace our reserve based loan; our ability to finance the repayment of our senior secured notes on maturity; and our ability to add production and reserves through our development and exploitation activities. In addition, many of the forward-looking statements contained in this document are located proximate to assumptions that are specific to those forward-looking statements, and such assumptions should be taken into account when reading such forward-looking statements. Please note that illustrative examples are not to be construed as guidance for the Company and further details on assumptions can be found in the Endnotes section of the presentation.

Although Obsidian Energy believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Obsidian Energy can give no assurances that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; the possibility that the semi-annual borrowing base re-determination under our of our reserve-based loan is not acceptable to the Company or that we breach one or more of the financial covenants pursuant to our amending agreements with holders of our senior, secured notes; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; reliance on third parties; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect Obsidian Energy, or its operations or financial results, are included in the Company's most recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein)), Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), EDGAR website (www.sec.gov) or Obsidian Energy's website.

Unless otherwise specified, the forward-looking statements contained in this document speak only as of January 8, 2017. Except as expressly required by applicable securities laws, we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

peters & co. annual energy conference · 2018. 1. 18. · september 30, 2017. ... 2018 capital...

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